United States

The Federal Reserve lowered interest rates by 50 basis points after its two-day meeting. Chairman Powell expressed confidence that inflation is steadily moving toward the target of below 2%. He said that the decision was also aimed at maintaining balance in the labour market. The committee indicated it expects another 50-basis point cut by year-end, though Powell noted they were in “no rush” to implement this and reiterated that future cuts will be data-dependent.

US equity markets initially rallied on the news, but gains were quickly reversed, and major indexes closed lower. The Dow fell 0.25%, losing 103 points to end at 41,503.10. The Nasdaq declined by 0.31% to 17,573, while the S&P 500 dropped 0.29%, shedding 16 points to close at 5,618.26. Earlier in the session, the S&P 500 had reached a record high of 5,689 before retreating. Nine out of the 11 sectors in the S&P 500 closed in negative territory, with only Energy and Communication Services managing slight gains. The Russell 2000 edged up by 0.14%, closing at 2,208.57.

Individual stock movements were largely muted as macroeconomic factors dominated market sentiment. Nvidia dropped 1.9% to $113.37, and Microsoft fell 1%, losing $4.34 to close at $430.81. JP Morgan dipped 0.8% to $207.53 after revealing talks with Apple about taking over its credit card business, while Apple shares rose 1.8%, finishing at $220.69.

Economic data showed a sharp increase in homebuilding in August, with single-family home starts jumping 15.8%, though future building permits experienced a slight decline. US Treasury yields climbed following the rate cut announcement, with the 2-year note rising by 1 basis point to 3.62% and the 10-year note increasing by 6 basis points to 3.705%. The US dollar initially weakened but later recovered, with the dollar index standing at 100.97. The USD is currently trading at 1.1118 against the euro and 142.24 against the yen.

Europe

European markets declined on Wednesday as investors awaited the US rate decision. The Euro Stoxx 600 dropped by 0.5%, closing at 514.59, a decline of 2.6 points. France’s CAC 40 fell by 0.57%, losing 42 points to settle at 7,444.9. Meanwhile, Germany’s DAX remained relatively stable, down only 0.08% to finish at 18,711.49. The healthcare sector saw losses following a report that the US might target price cuts for the diabetes and weight-loss drug Ozempic. As a result, Novo Nordisk shares fell by 2.35% to 882.2 Danish Kroner. In Italy, Campari’s CEO resigned after only five months in the role, citing personal reasons. This led to a sharp 7.48% drop in Campari’s shares, which closed at EUR 6.98.

The FTSE 100 also declined, dropping 0.68%, or 56 points, to finish at 8,253.68. UK inflation data showed that the Consumer Price Index (CPI) remained steady at 2.2%, though there was an increase in the services sector component. The Bank of England (BOE) is set to meet today, though no changes in interest rates are expected.

Bond yields rose globally as traders adjusted expectations following the US rate cut. In Germany, the 10-year bond yield increased by 5 basis points to 2.19%, while the 2-year bond yield rose by 4 basis points to 2.26%. The UK saw more pronounced increases, with the 2-year gilt yield climbing by 8 basis points to 3.895% and the 10-year gilt also rising by 8 basis points to close at 3.845%.

*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.

Commodities

Oil prices fell on Wednesday following a rate cut in the US. The West Texas Intermediate crude contract dropped 1.07%, or 76 cents, to close at US$70.43. Similarly, the Brent crude contract declined by 0.77%, or 56 cents, to US$73.14. Concerns over growth prospects arose after a 50 basis point rate cut. Although US weekly oil inventories fell more than expected, reaching the lowest level in a year, traders remained focused on the potential impact on economic growth. Tensions in the Middle East lingered in the background. Meanwhile, the US Energy Information Administration (EIA) confirmed plans to purchase up to 6 million barrels of oil to replenish the Strategic Petroleum Reserve.

In metals, copper saw a modest rise during London trading, with the LME 3-month copper contract increasing by US$30 to reach US$9,400 per tonne. Iron ore edged slightly higher during New York trading and is currently at US$91.05 per tonne. However, the futures contract fell by US$1.50, or 1.6%, during Singapore trading hours.

Gold retreated from recent highs, dropping by US$20.95 to settle at US$2,548.72. After initially spiking to US$2,600 in the wake of the rate announcement, gold prices pulled back as the Federal Reserve signalled no urgency to lower rates further. Silver also fell, dropping 2.80%, or 86 cents, to US$29.84. Bitcoin followed a similar pattern, spiking briefly before returning to the previous day’s level at US$60,084.

Economic Calendar

UK:

• BOE Interest Rate Decision –

US:

• Initial Jobless Claims – (weekly)
• Philadelphia Fed Manufacturing Index (Sep)
• Existing Home sales (Aug)